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Raising a deposit still the biggest hurdle for first time buyers – Nationwide

High house prices relative to average earnings continue to make raising a deposit a significant barrier for first time buyers, according to new research by Swindon-based building society Nationwide.
The UK’s second largest mortgage lender found that a twenty percent deposit now equates to 110 percent of the average income – a record high and up from 102 percent one year ago.

House prices have risen quicker than earnings over last year resulting in increase in cost of servicing a mortgage relative to take-home pay.

A survey by the lender published earlier this month found the average house price had crossed the quarter of a million pounds mark. But the average house price in Swindon is now £272,915, meaning first time buyers have to find a deposit of £54,000 while first time buyers in Marlborough – Wiltshire’s priciest town – need to find well over £100,000 for a deposit.

Andrew Harvey, senior economist at Nationwide, said: ““House price growth has exceeded earnings growth over the past year and the ratio of house prices to average earnings has increased to a record high.

“In the third quarter of this year, the UK First Time Buyer house price to earnings ratio stood at 5.5, above the previous high of 5.4 in 2007, and well above the long run average of 3.8.

“One of the consequences of high house prices relative to earnings is that it makes raising a deposit a significant challenge for prospective first time buyers.

“Indeed at present, a 20 percent deposit is now equivalent to 110 percent of the pre-tax income of a typical full-time employee, a record high and up from 102 percent a year ago.”

The report found that the average first time buyer in the South West would have to save for 11 years just to afford a deposit.

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